Mexico has endured drug wars for many years and this has been a constant source of frustration for the Mexican government. In 2006 however, when Felipe Caldron became President, the war escalated to one between the government and the drug lords. Sadly, since this happened, the homicide rate in Mexico increased by 23 percent. In 2010, the murder figures were at 22 per 100 000 citizens.
Even though violence has increased in the country, investors are not concerned as business continues as usual. Mexico is considered to be an attractive investment haven for a number of reasons, being on the border of America is not the least of these reasons. While the labor force is skilled it is comparatively low cost when compared to other countries around the world. In spite of the drug wars, Mexico is considered to be a safe country to trade with.
Mexico is one of the world’s largest silver producers and has a long history of producing silver. Mining of this precious metal dates back to the Spanish Conquest. Mining firms are drawn to Mexico due to its incredible mineral deposits which include gold and copper and the mining laws in Mexico favor investors. Mining plays a huge role in the Mexican economy and it is expected that in excess of $4 billion dollars will be invested in mining operations in Mexico this year.
The drug wars have had an adverse impact on the mining industry. In July this year 4 mining subcontractors were killed when armed men saw fit to enter the Met-Mex metals complex to the north of Mexico. Production was apparently unaffected and it is believed that these four cleaners and grounds men were actually targeted by the killers. To date no motive has been established. While these deaths may not have been related to mining or drug wars, it is only safe to assume that investors will be slightly cautious about investing in mining in Mexico.
Two mining companies were interviewed about the impact of the drug wars on the industry and it was reported by David Wolfin, CEO of Avino Silver and Gold mines, that productivity has not been affected by the violence. Wolfin went onto report that the violence was primarily between two gangs and that tourists and business people were not the targets of the war lords. In terms of the transporting of mining products, Wolfin remains unconcerned as it is only a worthless concentrate that is transported. Until this concentrate is smelted, it is worthless to anyone. Furthermore, Avino property is situated in a busy built up area and this makes it an unlikely and unattractive target for drug lords. While there are security personal based on the mines, it is not envisaged that security will be beefed up in the foreseeable future.
Mining companies use armed vehicles to transport silver bars and deliver them to the refiners. Should any losses occur, insurance would pick up the tab. For now it would seem that the mines are safe and that the insurance companies are the parties that could suffer losses should things get out of hand with regards to mining and the drug wars.